Electronics supply chain unprepared for conflict minerals law

SAN FRANCISCO—The U.S. electronics supply chain is unprepared to comply with federal conflict mineral disclosure requirement that goes into effect in less than two years, according to market research firm IHS iSuppli.

Roughly 90 percent publicly-traded U.S. component manufacturers have thus far not produced the data or documentation to fulfill the new regulatory requirement to detail the presence of so-called conflict minerals in their supply chains, according to IHS. The rule requires firms to file their first disclosure reports by May 31, 2014.

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Conflict minerals—those mined in conditions or armed conflict and human rights abuses—include tin, tantalum, tungsten and gold. These minerals are used in a wide range of components across the electronics supply chain, according to IHS.

In August, the Securities and Exchange Commission (SEC) approved a final rule that implementing conflict mineral requirements mandated by the 2010 Dodd-Frank Act. Under the terms of the SEC ruling, publicly traded electronics companies must disclose whether they use conflict minerals in their products and must state what efforts they have undertaken to ensure that their use of the raw materials does not contribute to human atrocities in the Democratic Republic of the Congo and adjoining countries in Africa.

According to IHS, conflict minerals are employed in all kinds of electronics products, from cellphones to hearing aids, to pacemakers and jet engines. For example, the firm estimates that 15 cents worth of tantalum was contained in every smartphone shipped when Dodd-Frank was signed in 2010. In 2012, this would amount to $93 million worth of tantalum in smartphones alone, the firm said.

"Large electronic original equipment manufacturers use tens of thousands of parts that must be examined to determine their conflict mineral content," said Rory King, director, supply chain product marketing at IHS.

Given the size and complexity of the task, King said the roughly 19 months remaining until the rule goes into effect is not a great deal of time for firms to communicate, collect, analyze and prepare information on mineral sources across a globally diverse, multi-tier supply chain.

According to IHS, the SEC rule directly applies to an estimated 5,994 companies that file reports to the SEC and to hundreds of thousands of their suppliers.Related stories:

Comments so far seem to echo Congress' thinking, that you should be able to certify where your parts come from.
However, this law is a lot harder to comply with that it may seem. Minerals are mined in conflict-riven places, smuggled across the border and sold in huge quantities, and lose their 'conflict' status.
Even if there is no smuggling, imagine a company like Apple trying to comply on a single model of iPad. The iPad is built by a company in China, which is sourcing components from another company in China; that company is sourcing refined materials from a chemical company in China--or is it Germany at this point?--and the raw materials came from where? How many points are in this graph?
The law does not say that each company must get certifications from its tier-1 suppliers. The law says that each company must certify that no minerals used are from conflict countries. Apple needs paperwork to demonstrate where the tantalum in every tantalum capacitor in the iPad comes from.
This means Apple needs auditors at their suppliers' suppliers' suppliers. How many people would that take?
I've used Apple as an example. The law applies to all US publicly traded companies. Smaller firms have zero chance of complying, as they will not have the leverage to force their suppliers to help them comply. And smaller companies will have even less chance of getting this done with their suppliers' suppliers, etc.
I don't argue that this isn't a worthy idea. But the details aren't sustainable in the current environment.

That is both disgusting and despicable. How can 90% of companies be closing their eyes to this? I'm betting those same companies have plenty of "social responsibility" programs in place to make themselves feel good, and I'm sure their HR departments constantly harangue employees about the importance of volunteering their time to good local causes. But give a crap about foreign people dying in mines for your products?? Naaaaaah!
Gross.

Don't agree that 19 months isn't enough time. The SEC created a 2 year phase-in period that helps companies. Good webinar on subject: http://www.element14.com/community/videos/7165/l/conflict-minerals-what-is-it-and-how-to-comply.